Dear Mr. Basavaraj,
I have been reading your blogs on financial planning on and off.
I am in a dilemma over an insurance plan and would appreciate to have your wise advice.
My wife purchased HDFC SL Crest Insurance Plan in 2012. Below are the details:
Insurance Plan: HDFC SL Crest (Highest NAV Guarantee)
Sum Assured: 5 Lacs
Policy Inception: Sep 2012
Policy Term: 10 yrs (2012-2022)
Premium Paying Term: 5 yrs (2012-2017)
We paid the premium for 2 yrs i.e. 2012 and 2013.
In 2014, the premium was not paid and the policy is in lapsed status.
We get notification from a bank that we can reinstate policy w/o any additional charges and all our benefits linked to a policy will be reinstated as original.
Can you advise me whether it will be beneficial to reinstate this policy or we could do something else?
PS: My wife is on maternity break since 2013 and may start working again. She may still need some investment for tax saving.
Thanks in advance for your guidance.
Sachin-First understand why IRDA banned further floating of such “Highest NAV Plans”. Such plans catched the eyes of investors as they promised highest NAV while maturity or claim. But the reality is, as the tenure of policy period goes on, they infuse more funds towards debt than equity to give you highest GUARANTEED NAV. The result is, such plans provide you the returns like debt product rather than equity. In fact less than regular debt instruments of that period.
Considering these factors and the premium you paid, I suggest you to stop payment of further premium. I know it is hard for us to lose the money. But in reality, you lose money if you continue. Hence, my suggestion will be to STAY AWAY.
Regarding tax saving options of your wife, there are many ways by which you can save tax as well as chose a product which match your financial goals. So no need to bother too much on this front. Just keep in mind that NEVER CLUB INSURANCE WITH INVESTMENT.
Note-Let me know the premium you paid yearly.
Dear Basavaraj,Thanks for your prompt feedback.We paid 50,000 as yearly premium. As on date we have paid 1 Lac in premium. As per your advice (and my initial preference too) I do not reinstate this policy. I was advised by HDFC that if we do not reinstate the policy our money get blocked and we get this after policy term as per std. bank rate on savings. To be clear and assured on this can you advise me what actions or documentation I should have with bank so that I do not face any issue later? Will bank give any document / certificate etc. stating that my policy is lapsed, “X” amount is in deposit with them and will be paid back in Year 20xx with annual interest as x.x%Regards,Sachin Ahuja
Sachin-Yes, they provide the status change of policy. You can ask them. Also, if lock in period is over, then in my view you can close it immediately. Not sure why they converting it to paid up.
Dear Basavraj,Thx for ur feedback. I will get in touch with HDFC on this point.Regards,Sachin Ahuja
Thank Mr Basavraj for answering our quires in this forum. I am NRI and have been investing of 2lakhs per year in this HDFC SL crest High NAV guaranteed fund since Dec 2010 , now its time for my last premium to paid in coming December ,so could you please suggest me whether to continue in this investment and wait for 7/10th year to take out money or any other better way to spend this last premium ?
Naash-It is a biggest fraud what insurance compnaies did by launching the so called HIGHEST NAV PLANS. Just come out at earliest.
Thanks basunivesh for your reply.